REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE 2014 DIVISION OF REVENUE AMENDMENT BILL [B11 – 2014], DATED 05 NOVEMBER 2014

The Standing Committee on Appropriations, having considered the Division of Revenue Amendment Bill [B11 – 2014], reports as follows:

1. Introduction

The Division of Revenue Amendment Bill (henceforth referred to as the Bill) was tabled in Parliament on 22 October 2014 by the Minister of Finance during the presentation of the 2014 Medium Term Budget Policy Statement (MTBPS); and referred to the Committee on 4 November 2014. The Bill addresses the following matters:

· Changes in the equitable division of nationally raised revenue among the spheres of government;

· Adjustments to Provincial Allocations;

· Adjustments to Local Government Allocations;

· Function Shifts; and

· Changes to gazetted frameworks and allocations (i.e. technical corrections).

This report focuses on amendments proposed in the Bill tabled by the Minister.

2. Equitable division of revenue raised nationally, among the spheres of government

Table 1 hereunder outlines the equitable division of revenue raised nationally among the three spheres of government as reflected in the Bill as Schedule 1.

Table 1: Schedule 1

Spheres of Government R’000	2014/15 Main Allocation	Adjustment	2014/15 Adjusted Allocation
National	735 604 179	(6 222 624)	729 381 555
Provincial	362 468 075		362 468 075
Local	44 490 145		44 490 145
TOTAL	1 142 562 399	(6 222 624)	1 136 339 775

The net effect of the 2014 adjustments is a reduction in the 2014/15 estimates of expenditure from R1.143 trillion to R1.136 trillion. For 2014/15, main budget spending was revised down by R6.2 billion to R1.136 trillion compared with the 2014 Budget estimate. However, this still represents an increase in expenditure of 8.5 per cent over the 2013/14 outcome.

3. Changes in provincial allocations

In terms of the Provincial Equitable Share, there were no in-year additions to the equitable share. All non-discretionary obligations must be adequately provided for within provincial budgets. Significant changes to the provincial grant allocations include:

Rollover of Conditional Grant

• R9.7million for KZN for HIV and Aids (Life Skills Education) Grant

Conversions of Indirect Provincial Conditional Grants to Direct Provincial Conditional Grants

• R397.7m from (indirect) School Infrastructure Backlogs Grant to (direct) Education Infrastructure Grant for Western Cape.

A reduction of R375 million from the indirect National Health Grant) through the following:

• An amount of R262 million has been converted from the indirect National Health Grant- health facility revitalisation component to the direct Health Facility Revitalisation Grant for four provinces (Free State, KwaZulu Natal, Northern Cape, North West);
• A saving of R113 million was also declared on indirect grant National Health Grant.

4. Changes in local government allocations

Significant changes to the local government allocations include:

Disaster recovery:

• R157 million for disaster recovery to be transferred to municipalities in 5 provinces (Gauteng, KwaZulu Natal, Limpopo, Mpumalanga and Western Cape) through the Municipal Disaster Recovery Grant

Rollovers:

• R1.5 million for Tswaing Local Municipality (NW) on the Municipal Water Infrastructure Grant
• R80.2 million for the Municipal Infrastructure Grant
• R18.6 million for the Regional Bulk Infrastructure Grant (indirect grant)

Unforeseen and unavoidable (Municipal Water Infrastructure Grant):

• R15 million for emergency boreholes in Giyani
• R8.3 million for emergency repairs to the Waste Water Treatment Works in Bloemhof (Dr Ruth Segomotsi Mompati District Municipality)

5. Function Shifts

Following the national and provincial elections in 2014, several changes to the functions and structures of national departments were announced and the 2014 adjustments budget provides for the following:

• The sanitation function has been shifted from the Department of Human Settlements to the Department of Water and Sanitation. This shift is effected in the 2014 Adjustments Budget.
• The following conditional grants will move to Department of Water and Sanitation:

- The Rural Households Infrastructure Grant (direct and indirect) which funds on-site sanitation for rural areas where reticulated services are not feasible;

- Human Settlements Development Grant (indirect portion) which funds the eradication of bucket sanitation.

6. Changes to gazetted frameworks and allocations

Section 16(2) of the Division of Revenue Act (No.10 of 2014) requires National treasury to consult Parliament on any proposed changes to a conditional grant framework for the purposes of correcting an error or omission before gazetting the changes. The proposed changes to the provincial and local government conditional grant frameworks include:

Education Infrastructure Grant:

• Correction to align due dates for infrastructure plans with those in the 2014 Division of Revenue Act (DORA);
• Correction to maximum amount that can be used for technical capacity from
  R16 million to R26 million.

Health Facility Revitalisation Grant:

• Correction to align due dates for infrastructure plans with those in the DoRA;
• Correction to maximum amount that can be used for technical capacity from
  R16 million to R29 million.

National Health Grant: Health Facility Revitalisation Component:

• Correction to align due dates for infrastructure plans with those in the DoRA;
• Correction to details required in plans that must be submitted;
• Correction that report does not have to be submitted to National Treasury as plans and other documentation will already have been submitted.

National Health Grant: National Health Insurance Component:

• Correction to refer to all “health practitioners” not only “medical practitioners”;
• “Contracting” corrected to “purchasing services” so that it doesn’t require professionals to provide services on provincial premises;
• Omission of implementing alternative models for supplying chronic medicines is corrected;
• Due date for business plans corrected;
• MTEF allocations were incorrectly stated, these are corrected.

Provincial Roads Maintenance Grant:

• Correction to process for publishing provincial project plans. These must be tabled in provincial legislatures, not “gazetted” in provincial legislatures.

Human Settlements Development Grant (indirect portion):

• Indirect grant created in 2014/15 to fund bucket eradication projects;
• Grant framework corrected to reflect that the Department of Water and Sanitation will administer this indirect grant.

Details per municipality of the changes to municipal grant allocations and details per province of the changes to indirect grant allocations will also be gazetted

7. Recommendation

The Standing Committee on Appropriations, having considered the Division of Revenue Amendment Bill [B11 – 2014] (National Assembly – section 76(1) (the Bill), tabled on 22 October 2014 as part of the 2014 Medium Term Budget Policy Statement and classified as a Section 76 (1) Bill, recommends that the Bill be adopted, without amendments.

Report to be considered.